September 9, 2023

According to preliminary data from Finnish Customs, the country’s trade deficit reduced in July as imports declined more quickly than exports.

From EUR 1.2 billion in the same month last year to EUR 605 million in July, the trade deficit significantly decreased.

In July, the value of imports fell by 24.6 percent while exports fell 11.1 percent year over year.

In July, exports to EU members fell 19.0 percent yearly, and imports to those countries fell 22.9 percent.

Data revealed that imports from non-EU nations fell noticeably by 26.6 percent, while exports to such nations fell by 22.6 percent.

Source: RTT NEWS
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither Karen Audit nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

September 8, 2023

Industrial production in Czech Republic decreased in real terms by 2.8%, year-on-year (y-o-y), in July. In the month-on-month (m-o-m) comparison, it was by 2.6% lower. The value of new orders decreased by 3.0%, y-o-y.

Industrial production in July 2023 was in real terms by 2.6% lower, m-o-m. In the year-on-year comparison, it decreased by 2.8%. “The decrease in industrial production was the most contributed to by electricity, gas, steam and air conditioning supply, in which longer temporary summer shutdowns and a higher comparison basis of the previous year were reflected. A lower demand from construction had an influence on a decrease of manufacture of other non-metallic mineral products and plastic products,” Veronika Doležalová, Head of the Industrial Statistics Unit of the Czech Statistical Office (CZSO), says.

The value of new orders at current prices in surveyed industrial CZ-NACE activities decreased by 3.0%, y-o-y, in July 2023. Non-domestic new orders decreased by 2.6%, y-o-y; domestic new orders dropped by 3.8%. The decrease was the most contributed to by manufacture of machinery and equipment, in which an increased taking of orders in the preceding months was reflected. The decrease of orders continued in chemical industry and in manufacture of basic metals. The value of new orders in industry only increased in manufacture of motor vehicles, trailers and semi-trailers (partially due to the influence of a lower comparison basis), in manufacture of other transport equipment (thanks to conclusion of long-term orders from abroad for urban rail vehicles), and slightly also in manufacture of electrical equipment and in manufacture of basic pharmaceutical products and pharmaceutical preparations.

The average registered number of employees in industry decreased by 2.0%, y-o-y, in July 2023; their average gross monthly nominal wage increased by 9.5%, y-o-y.

According to data released by Eurostat, industrial production in the EU27 decreased by 1.2%, year-on-year, in June 2023. The biggest y-o-y decrease was recorded by Estonia (by 12.7%) and Bulgaria (by 9.3%). German industry decreased by 1.4%. On the other hand, industry of Denmark increased the most (by 12.3%). Czech industry increased by 0.9%, performance of Slovak industry increased by 3.6%.

Source: CZSO
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither Karen Audit nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

September 8, 2023

REGISTRATIONS AND BANKRUPTCIES IN GREECE

Business demography statistics constitute, at European and international level, one of the most rapidly developing statistical domains and attract the interest of policy makers, institutional users and society, in general, as they are widely relevant through the information they provide.

In particular, the monitoring of registrations and bankruptcies on a quarterly basis provides up-to-date information on the evolution of business activity and subsequently of the economic climate.
More specifically, ELSTAT announces:

▪ Quarterly data on registrations, by section of economic activity, for the 1 st and 2nd quarter of 2022 and 2023.
▪ Quarterly data on registrations, by section of economic activity and by Large Geographical Area / category of Legal Form of enterprise, for the 2 nd quarter of 2023.
▪ Graphical representation of registrations per week, for the period 1st quarter 2022 – 2 nd quarter 2023.

Change in the number of registrations and bankruptcies

➢ The number of registrations in all economic sections in the 2 nd quarter 2023 amounted to 26,897, recording an increase of 6.1% in comparison with the 2nd quarter 2022, when the respective number was 25,341 and a decrease of 21.4% in comparison with the 1 st quarter 2023, when the respective number was 34,213. Among the sections of economic activity with the largest contribution to the total turnover, according to the data of the Statistical Business Register for the reference year 2020, the biggest increase in the number of registrations in the 2 nd quarter 2023 compared with the 2 nd quarter 2022, was recorded in section “Transportation and Storage” (33.0%) and in section “Wholesale and Retail Trade; Repair of Motor Vehicles and Motorcycles” (16.9%), while a decrease was recorded in section “Electricity, Gas, Steam and Air Conditioning Supply” (64.4%).
➢ The number of bankruptcies in all economic sections both for the 2 nd quarter of 2023 and for the 2 nd quarter of 2022 are not disclosed for statistical confidentiality reasons regarding the protection of the identity of the enterprises.

Source: HELLENIC REPUBLIC HELLENIC STATISTICAL AUTHORITY
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither Karen Audit nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

September 8, 2023

In July 2023 the number of employed people in Italy fell, while unemployed and inactive persons increased.

On a monthly basis, the decrease of employment (-0.3%, -73 thousand) concerned both men and women, and people aged 25-49. Overall, the employment rate dropped to 61.3% (-0.2 p.p.).

In the last month, the growth in the number of unemployed persons (+1.9%, +37 thousand) involved both genders and persons between 25 and 49 years of age. The unemployment rate rose to 7.6% (+0.2 p.p.), the youth rate declined to 22.1% (-0.2 p.p.).

In July, the number of inactive persons aged 15 to 64 increased for men and for people under the age of 35. The inactivity rate remained stable at 33.5% .

In the period May-July 2023, with respect to the previous quarter (February-April 2023), employment increased (+0.5%, +119 thousand).

In the last three months, a drop was registered for both unemployed persons (-3.2%, -64 thousand) and inactive people aged 15-64 years (-0.5%, -69 thousand).

Compared with July 2022, the number of employed persons rose by 1.6% (+362 thousand), the growth concerned both genders and all age groups except 35-49 years; the employment rate showed an increase of 1.1 p.p. .

On a yearly basis, the rise of employed people was accompanied by a decrease of both unemployed (-3.8%, -76 thousand) and inactive persons aged 15-64 (-2.9%, -371 thousand).

Source: ISTAT
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither Karen Audit nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

September 8, 2023

Curbing cross-border illicit proceeds demands a united global effort and innovative approaches

Cross-border financial crime is here to stay. While people everywhere enjoy the convenience of a globally connected financial system, criminals exploit this intricate network to move illicit funds across borders and evade capture. As these criminals protect their ill-gotten wealth derived from tax evasion, corruption, and drug trafficking, among others, financial crimes thrive. No financial institution or country is immune. Money laundering scandals caused bank collapses and shocked countries. Ultimately, society pays the cost through an erosion of trust in the integrity of the financial system, often leading taxpayers to subsidize failing banks and limiting customer access to credit.

Banks, as gatekeepers to the financial system, battle unceasingly against money laundering and terrorist financing. But national anti-money laundering efforts focus primarily on domestic risks, and as a result they often lag. Bank regulators also play a crucial role, but often don’t make the best use of limited resources, and divergent approaches hamper effective global collaboration.

IMF staff partnered with eight Nordic and Baltic countries—Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Norway, and Sweden—in a first-of-its-kind anti-money laundering technical assistance project. Our findings reveal that combatting money laundering is beyond the capacity of any single nation—and that countries must innovate together to find a solution.

Tracking criminal proceeds

IMF staff is constantly expanding the toolkit to help Fund members focus on cross-border illicit flows. Using machine learning technologies and data analysis, we scrutinize financial movements, gaining insights into the global landscape and identifying indicators of potential macro-critical money laundering scenarios. Our analysis features in the annual health checks of IMF member economies (e.g., Singapore 2022 Article IV consultation) and under the Financial Sector Assessment Program (e.g., UK 2022 FSAP).

Collaborating with the Nordic-Baltic countries, we used these tools to improve countries’ understanding of unusual financial flows warranting scrutiny. These tools enhance countries’ ability to screen potential illicit financial flows and focus on emerging threats. Collaboration also allows countries to identify and connect seemingly disconnected cross-border money laundering and terrorism financing threats.

Following the money also involves considering countries chosen by criminals for cleaning illicit gains. This allows key anti-money laundering agencies to develop measures to enhance scrutiny of unusual transactions passing through their financial systems that originate in high-risk jurisdictions.

Knowing the breaking point

While the Fund’s focus on macroeconomics and the link between financial stability and financial integrity risks is well established across our work our project with the Nordic-Baltic countries further expands our efforts to better quantify the financial stability impact of money laundering shocks.

Examining data related to regional money laundering cases reveals a telling pattern: banks grappling with financial integrity concerns suffered sharp stock price drops, elevated perceived credit risks, and declines in deposits affecting their liquidity. Moreover, the money laundering shocks triggered equity price declines and heightened the cost of insuring against a corporate default, as shown by credit default swap prices. And that’s only what happened at an individual bank level. Looking at the regional impact, substantial spillover effects affected other key regional banks, indicating a contagion dynamic between the affected banks and their counterparts.

Helping the gatekeeper

Taking a broader perspective, our study of the supervisory frameworks within the Nordic-Baltic region led to recommendations at both country and regional levels.

As main gatekeepers of the financial system, banks must prevent and detect money laundering. Criminals find banks alluring due to their extensive cross-border networks, interbank ties, and products and services that open themselves up to the risk of money laundering. A parallel borderless trend is the rise of crypto assets, offering speedy global transfers attractive to criminals.

That is why it’s imperative that national regulators who supervise banks’ anti-money laundering efforts are able to look at the bigger picture when overseeing them. With a global supervisory mechanism lacking, supervisors need to broaden their perspective, scrutinizing non-resident risks and inter-border laundering countermeasures. This calls for stronger international collaboration, a point emphasized by IMF staff (e.g., Euro Area Article IV consultation).

Going forward, while good practices are emerging in cross-border transaction data collection and analysis, the integrated banking system calls for greater cross-border data collection to better understand and mitigate these risks. Technological solutions can aid in analyzing this information to create a regional picture for targeted supervisory efforts, including multi-country initiatives. Countries should also exchange data on money laundering incidents, while also delving deeper into the need for banks to bolster capital reserves against associated losses.

Regulators should also vigilantly monitor newer entrants to international finance, such as crypto asset service providers, with risk-adjusted scrutiny. Given the global nature of these providers, cross-border cooperation remains key here as well.

The bottom line is that continued analysis of financial integrity’s impact on stability can fortify the global financial system against money laundering shocks.

Returning to the Nordic-Baltic project, the region’s narrative serves as a cautionary tale: “Invest in preventive and mitigating measures before the scandal is at your doorstep.” Presently, the commitment to prevent money laundering in the region is a priority at the highest levels of the different governments concerned.

Source: IMF BLOG – by Pierre Bardin, Antoine Bouveret, Grace Jackson, Maksym Markevych
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither Karen Audit nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

September 8, 2023

» The FAO Food Price Index* (FFPI) averaged 123.9 points in July 2023, up 1.5 points (1.3 percent) from June but remaining 16.6 points (11.8 percent) below its value in the corresponding month last year. The FFPI’s rebound in July was led by a solid rise in the vegetable oils price index, partially offset by a significant decline in the sugar price index, together with small decreases in the price indices for cereals, dairy and meat.

» The FAO Cereal Price Index averaged 125.9 points in July, down 0.7 points (0.5 percent) from June and 21.3 points (14.5 percent) below its value a year ago. This month’s slight decline stems from a fall in international coarse grain prices, which declined by 4.8 percent from June. International maize prices continued their downward trend due to increased seasonal supplies from ongoing harvests in Argentina and Brazil and potentially higher-than-initially-anticipated production in the United States of America, where conditions slightly improved and the planted area was revised upwards. Among other coarse grains, world prices of sorghum declined in tandem with those of maize, while world barley prices were nearly stable, influenced by spillover effects from wheat markets. By contrast, international wheat prices rose by 1.6 percent, marking their first month-on-month increase in nine months, mainly driven by the uncertainty over Ukraine’s exports following the decision taken by the Russian Federation to terminate the implementation of the Black Sea Grain Initiative and the subsequent damage to Ukraine’s port infrastructure on both the Black Sea and the Danube River. Continued dry conditions in Canada and the United States of America also added pressure on prices. The FAO All Rice Price Index increased by 2.8 percent in July to reach its highest level since September 2011, driven mostly by price increases in the Indica market segment. In that market, India’s 20 July prohibition of non-parboiled Indica exports fostered expectations of greater sales in other origins, amplifying upward pressure already exerted on prices by seasonally tighter supplies and Asian purchases.

» The FAO Vegetable Oil Price Index averaged 129.8 points in July, up 14.0 points (12.1 percent) from June, marking the first increase after seven months of consecutive declines. This pronounced increase in July was driven by higher world quotations across sunflower, palm, soy, and rapeseed oils. International sunflower oil prices rebounded by more than 15 percent month-on-month, primarily underpinned by renewed uncertainties surrounding the exportable supplies out of the Black Sea region after the decision taken by the Russian Federation to terminate the implementation of the Black Sea Grain Initiative. In the meantime, world palm oil prices also rose markedly, reflecting prospects of subdued production growth in leading producing countries. As for soy and rapeseed oils, international prices increased on continuing concerns over the production outlooks of soybeans in the United States of America and rapeseed in Canada, respectively. Rising world crude oil quotations also lent support to vegetable oil prices.

» The FAO Dairy Price Index averaged 116.3 points in July, down 0.5 points (0.4 percent) from June, marking the seventh consecutive monthly decline, and standing 30.2 points (20.6 percent) below its value in the same month last year. The decline in July was led by lower quotations for skim milk powder and butter, underpinned by subsided market activities in Europe during the summer holidays and muted interest in import demand in the months ahead due to market uncertainty over the future directions of prices. By contrast, whole milk powder prices recovered slightly, mostly influenced by exchange rate movements, notwithstanding steady production progress in New Zealand in line with seasonal trends. Following five months of steep declines, world cheese prices recovered slightly, reflecting somewhat strengthened food services sales and the impact of hot weather on seasonally declining milk supplies in Europe.

» The FAO Meat Price Index* averaged 117.8 points in July, down 0.4 points (0.3 percent) from June and remaining 6.3 points (5.1 percent) below its corresponding month a year ago. International bovine meat prices fell, reflecting higher export availabilities in Oceania, coinciding with subdued import demand in Asian markets amid higher inventories and sluggish internal sales. Poultry meat prices also fell slightly due to increased supplies from leading exporters, despite the persistent impacts of the avian influenza outbreaks in major producing regions. Meanwhile, decreases in ovine meat prices continued for the third consecutive month, reflecting high supply availabilities in Oceania and lower demand from leading importers, including China and Western Europe. By contrast, continued tight supplies from Western Europe and the United States of America, in tandem with high seasonal demand, led pig meat prices to increase for the sixth consecutive month.

» The FAO Sugar Price Index averaged 146.3 points in July, down 5.9 points (3.9 percent) from June, marking the second consecutive monthly decline, but remaining 33.4 points (29.6 percent) above its level in the same month last year. The good progress of the 2023/24 sugarcane harvest in Brazil, and improved rains benefiting soil moisture conditions across most growing areas in India, weighed on world sugar prices in July. Additional downward pressure on prices was exerted by sluggish import demand from Indonesia and China, the world’s largest sugar importers. However, persistent concerns over the potential impact of the El Niño phenomenon on the 2023/24 sugarcane crops, particularly in Thailand, along with higher international crude oil prices, reined in the declines in world sugar prices.

Source: FAO
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither Karen Audit nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

September 7, 2023

S&P Global / CIPS UK Services PMI®

UK service providers experienced a renewed downturn in business activity during August. Survey respondents mostly cited weaker business and consumer spending, combined with the impact of higher borrowing costs on client demand. A lack of new work to replace completed projects resulted in the fastest decline in backlogs for just over three years. Higher wages continued to push up business expenses, but the overall rate of input price inflation was the joint-lowest since May 2021. Softer cost pressures and greater competition for new work contributed to the weakest rise in prices charged by service providers for two years in August. The headline seasonally adjusted S&P Global / CIPS UK Services PMI® Business Activity Index registered 49.5 in August, down from 51.5 in July and the lowest since January. Any figure below 50.0 indicates an overall reduction in service sector output. The latest index reading signalled a marginal decline in business activity, which contrasted with a solid pace of expansion throughout the second quarter of 2023. Lower output reflected a return to falling sales volumes in August, as signalled by a marginal decline in new work for the first time since January. Service providers typically noted caution among clients and fewer new business opportunities, linked to rising interest rates, squeezed disposable incomes and worries about the economic outlook.

New export orders increased in August, but the rate of growth was only marginal and the weakest since December 2022. Brexit-related trade difficulties were again cited by survey respondents as a constraint on sales to EU clients, alongside weak global demand. Subdued business conditions put a brake on staff hiring across the service economy, with the latest rise in employment the
slowest since March. Job creation was attributed to long-term business expansion plans, although some firms noted that cost pressures had led to the non-replacement of departing staff.

A combination of rising employment and falling volumes of incoming new orders in August led to a sharp reduction in backlogs of work. Lower levels of unfinished business have now been recorded for three months in a row, and the latest fall was the steepest since June 2020. Some service providers commented on excess capacity in the wake of decreasing customer demand.
Meanwhile, the latest survey data indicated another round of historically strong cost inflation across the service sector. This reflected rising salary payments, as well as higher fuel prices and elevated energy bills, according to survey respondents. Some firms noted falling raw material costs, driven by improving availability among suppliers. Measured overall, the rate of input cost inflation was the joint-lowest for 27 months (equalling that seen in June).

Softer cost pressures and a weaker pipeline of new business encouraged more competitive pricing strategies in August. The overall rate of prices charged inflation across the service economy eased for the fourth month in a row and was the lowest since August 2021. Looking ahead, service sector companies remained optimistic about their growth prospects. Around 48% of the survey
panel predict an upturn in output during the next 12 months, while only 12% expect a decline. The degree of confidence nonetheless eased fractionally since July and was the lowest for seven months. Anecdotal evidence suggested that concerns about the negative impact of rising interest rates on customer demand had acted as a constraint on business activity expectations.

Source: S&P GLOBAL
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither Karen Audit nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

September 7, 2023

In July 2023, industrial producer prices fell by 0.5% in the euro area and by 0.6% in the EU, compared with June 2023, according to estimates from Eurostat, the statistical office of the European Union. In June 2023, prices decreased by 0.4% in both the euro area and the EU. In July 2023, compared with July 2022, industrial producer prices decreased by 7.6% in the euro area and by 6.6% in the EU

Monthly comparison by main industrial grouping and by Member State

Industrial producer prices in the euro area in July 2023, compared with June 2023, decreased by 1.2% for intermediate goods and by 0.9% in the energy sector, while prices increased by 0.1% for non-durable consumer goods and by 0.2% for both capital goods and durable consumer goods. Prices in total industry excluding energy decreased by 0.4%.

In the EU, industrial producer prices decreased by 1.2% for intermediate goods, by 1.0% in the energy sector and by 0.1% for non-durable consumer goods, while prices remained stable for durable consumer goods, and prices increased by 0.2% for capital goods. Prices in total industry excluding energy decreased by 0.4%. The largest monthly decreases in industrial producer prices were recorded in Ireland (-8.1%), the Netherlands (-2.6%) and Sweden (-1.8%), while the highest increases were observed in Latvia (+2.2%), Slovakia (+1.7%) and Croatia (+1.3%).

Annual comparison by main industrial grouping and by Member State

Industrial producer prices in the euro area in July 2023, compared with July 2022, decreased by 24.2% in the energy sector and by 4.0% for intermediate goods, while prices increased by 4.7% for capital goods, by 5.1% for durable consumer goods and by 7.6% for non-durable consumer goods. Prices in total industry excluding energy increased by 1.6%.

In the EU, industrial producer prices decreased by 21.5% in the energy sector and by 3.9% for intermediate goods, while prices increased by 4.5% for capital goods, by 4.6% for durable consumer goods and by 7.6% for non-durable consumer goods. Prices in total industry excluding energy increased by 1.6%. The largest annual decreases in industrial producer prices were recorded in Ireland (-39.5%), Bulgaria (-18.1%) and Italy (-13.8%), while the highest increases were observed in Hungary (+18.8%), Slovakia (+17.8%) and Slovenia (+6.8%).

Source: Eurostat
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither Karen Audit nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

September 7, 2023

Factory gloom deepens as downturn persists amid falling world trade

Production losses remained modest, with output supported by companies enjoying smoother supply chains and eating into backlogs of work. But new orders continued to fall, led by an intensifying downturn in global trade flows, sending business expectations about the year ahead to their lowest since last November.

Some encouragement can be gleaned from tentative signs of the inventory cycle becoming more supportive to production in coming months, but near-term risks still seem tilted to the downside.

Global factories cut output again in August

Global manufacturing output fell slightly for a third straight month in August, according to the latest PMI surveys compiled by S&P Global and sponsored by JP Morgan. At 49.4, up from 48.9 in July, the output index from the Global Manufacturing PMI – our preferred measure of current factory production – signaled a slight easing in the rate of contraction but has now indicated falling output in nine of the past 13 months.

The past year has consequently seen the worst spell for global manufacturing since the global financial crisis of 2008-9, albeit the overall decline signaled having been comparatively modest.

Asia outperforms

There are some notable regional trends, with Asia generally outperforming. Robust and accelerating growth was seen in Asia excluding China and Japan in August, with India once again the star performer. Mainland China itself also saw a welcome return to growth after output briefly slipped into decline in July for the first time in six months. The overall expansion seen in Asia belied some struggling performances, however, with marked output declines witnessed in Taiwan, Malaysia and South Korea.

Output meanwhile fell in Japan, the US, Canada and in Europe. The eurozone recorded the steepest production decline, led by Germany. However, the UK also reported a worryingly sharp and accelerating downturn.

In both the US and Canada, August saw output fall back into decline after brief respites in July. Mexico likewise saw factory output fall for the first time in three months.

Demand environment deteriorates, led by falling global trade

The drop in production could be traced to a fourteenth successive monthly decline in new orders received by factories worldwide. Although the rate of order book decline moderated in August, it remained stronger than the rate at which output was reduced. Hence the relatively steeper rate of loss of orders hints at a further downward production adjustment in September.

Leading the order book decline was an extension of the recent downturn in global goods trade. New export orders for manufactured goods fell in August for a seventeenth straight month, the rate of decline easing only slightly compared to the sharp deterioration recorded in July. This represents the worst prolonged period of global trade decline since the global financial crisis.

Optimism slides to nine-month low amid concern over excess capacity

The gap between the rates at which output and new orders were falling in August could once again be explained by companies supporting production through orders placed in prior months. However, these backlogs of orders have now fallen for 14 consecutive months, dropping in August at a rate similar to the steep declines seen throughout much of the past year. The steady erosion of these backlogs of work, in many cases built up during the pandemic, points to the development of excess capacity and contributed to a further pull-back in manufacturers’ expectations of output in the year ahead. Production expectations sank in August to the lowest recorded since last November.

Worries about increasing customer reluctance to spend, recession risks, the impact of higher interest rates and the cost-of-living crisis also all dented optimism.

Supply conditions continue to improve, but at slower rate

One factor providing a support to production, facilitating the fulfilment of back orders, was a further improvement in supply conditions. Average supplier delivery times shortened globally for a seventh successive month in August. This represents the longest continual period of supply-chain improvement recorded by the survey since the global financial crisis, albeit coming on the heels of the biggest supply chain disruption on record thanks to the pandemic.

However, the improvement in supplier delivery times during August was the smallest recorded for six months, in part reflecting growing delays in the provision of some items.

The survey data nevertheless showed that the incidence of input buying for safety stock considerations fell globally in August to the lowest since 2009. The number of companies reporting any items in short supply has likewise continued to fall, down in July and August to its lowest since the start of the pandemic.

Inventory unwind showing signs of peaking

While an unwinding of inventories, accumulated during the supply concerns of the pandemic, has added to the weakness of global manufacturing in recent months, this destocking is showing some signs of peaking.

Although inventories of inputs fell at an increased rate and input buying by manufacturers fell for a thirteenth successive month in August, the rate of decline of the latter eased marginally for a second month in a row.

Stocks of finished goods were meanwhile also cut for the eighth time in the past nine months, but the fall was the smallest for three months.

Looking into the reasons cited by manufacturers around the world for changing inventory trends, we highlight two further series worth monitoring in the coming months.

First, we look at the incidence of manufacturers choosing to reduce their inventories of finished goods due to concerns over weak demand. This series peaked back in May at its highest since 2009 and has since fallen, albeit remaining elevated by historical standards.

Second, the number of companies choosing to cut output in order to reduce their inventory levels has likewise come down sharply from a peak earlier in the year. This series hit a near-record high in March but is now down to its lowest so far this year. This suggests that the destocking cycle is acting as a reduced drag on global production.

Outlook

The August surveys point to an ongoing malaise of manufacturing, with production levels continuing to edge lower amid a further deterioration in demand, in turn leading to a depletion of work-in-hand. Global trade in particular is showing further signs of deteriorating, but it is notable that production and order book trends are weakest in Europe and the US amid rising interest rates and elevated inflation.

In this environment, companies are taking a gloomier view on near-term prospects, pulling back on their anticipated output growth in the year ahead as order books deteriorate.

Two factors are identified which are supporting growth: supply conditions continue to improve and there are signs that the destocking cycle may be peaking. These will be two key trends to watch in the months ahead, in the hope that global production will start to revive as we head towards the end of the year. However, given the further worsening of manufacturers’ output expectations, the outlook remains one where the balance of risks appears tilted towards further weakness in the coming months.

Source: S&P GLOBAL – by Chris Williamson
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither Karen Audit nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

September 7, 2023

Year-on-year inflation in the OECD, as measured by the Consumer Price Index (CPI), rose to 5.9% in July 2023, after 5.7% in June, the first increase since October 2022 . This increase was mainly driven by a sharp rise in inflation in Türkiye. Excluding Türkiye, OECD inflation is estimated to have been broadly stable in July. Falls in inflation were recorded in 26 of 38 OECD countries, of which 17 experienced declines above 0.5 percentage points.

Energy inflation in the OECD remained negative, at minus 7.5%, after minus 9.6% in June. It was negative in year-on-year terms in 30 OECD countries, and it declined in 22 countries relative to the previous month. Food inflation continued to fall at the same pace as in the previous month, reaching 9.2% in July, its lowest level since February 2022, after 10.1% in June. Inflation less food and energy (core inflation) rose slightly, to 6.7% from 6.6% in June.

Year-on-year inflation in the G7 was stable at 3.9% in July. The largest decline was observed in the United Kingdom where energy inflation fell sharply. However, the inflation rate in the United Kingdom is still the highest rate among G7 countries. Headline inflation also declined in Italy, France and Germany. By contrast, headline inflation increased in Canada and the United States, nevertheless headline inflation rates remained more than 2.5 percentage points below the average OECD rate. Headline inflation was stable in Japan. Non-food and non-energy items remained the main contributors to headline inflation in all G7 countries in July.

In the euro area, year-on-year inflation as measured by the Harmonised Index of Consumer Prices (HICP), continued to decline, albeit at a slower pace than in previous two months, reaching 5.3% in July 2023, after 5.5% in June. In August 2023, according to Eurostat’s flash estimate, inflation is estimated to have been stable in the euro area. This masks variability across member states. HICP inflation is estimated to have increased to 5.7% in France after 5.1% in July with a sharp rise in energy inflation, while headline inflation estimates have been broadly stable in Germany and declining in Italy. Energy deflation in the euro area is estimated to have been less pronounced in August than in July and core inflation is estimated to have slowed to 5.3%, after 5.5% in July.

In the G20, year-on-year inflation increased, to 5.8% in July 2023, from 5.5% in June. Inflation increased in India for the second consecutive month and in Brazil after one year of continuing decrease. By contrast, headline inflation declined in Argentina, South Africa, Saudi Arabia, Indonesia and China, where total inflation was negative for the first time since February 2021.

Source: OECD
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither Karen Audit nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.